Amazon purchase of Whole Foods could spur other retail experiments

NEW YORK — Online retail giant Amazon is making a bold expansion into physical stores with a $13.7 billion deal to buy Whole Foods, setting the stage for radical retail experiments that could revolutionize how people buy groceries and everything else.

Amazon could try to use automation and data analysis to draw more customers to stores while helping Whole Foods cut costs and perhaps prices. Meanwhile, the more than 460 Whole Foods stores in the U.S., Canada and the U.K. could be turned into distribution hubs — not just for delivering groceries but as pickup centers for online orders.

Moody’s lead retail analyst Charlie O’Shea said the deal could be “transformative, not just for food retail, but for retail in general.”

Walmart, which has the largest share of the U.S. food market, has already been pushing harder into e-commerce to build on strength in its stores and groceries. It announced Friday that it’s buying online men’s clothing retailer Bonobos for $310 million, following a string of online acquisitions including ModCloth and Moosejaw.

But if Amazon can be the one-stop shop for everything — groceries had been one of the key missing elements — customers would have even less of a need to go to Walmart or elsewhere.

TOUGH TIMES FOR GROCERS

Amazon already offers grocery-delivery services in five markets, but analysts say expansion is tough because its current distribution centers are set up for dry goods, not perishables. Just two years ago, Whole Foods CEO John Mackey told Bloomberg BusinessWeek that Amazon’s foray into grocery delivery would be “Amazon’s Waterloo.”

But it was Whole Foods that fell behind as shoppers found alternatives to the organic and natural foods it helped popularize since its founding in 1978. Whole Foods has seen its sales slump and recently announced a board shake-up and cost-cutting plan amid pressure from activist investor Jana Partners.

Groceries are already a fiercely competitive business, with low-cost rivals like Aldi putting pressure on traditional supermarket chains and another discounter, Lidl, opening…